SINGAPORE (Oct 18): CGS-CIMB Securities does not expect Sembcorp Marine to meet the house's $2 billion and Street's $2-3 billion order target for 2018.
In a Thursday report, analyst Lim Siew Khee thinks a more achievable figure is $1-1.5 billion and on a $1 billion order assumption for 2018, our earnings for FY19F-20F could be reduced by 6% p.a.
"We are leaving our numbers unchanged for now," says Lim although year to date, SembMarine has only clinched $730 million of orders.
SembMarine's project pipeline also remains hazy at best. With the change in 40% ownership from Chevron to Equinor (Statoil), CGS-CIMB says the project is likely to be delayed, assuming the transfer is completed in 2019. Discussions on the Gravifloat project is also continuing but with no clarity on the timeline.
Nevertheless, SembMarine has delivered eight out of nine Borr Drilling rigs, with final payment pending successful charter of the rigs by 2019.
The offshore newbuild sector is in the initial stages recovery, says CGS-CIMB Securities.
Today, high-spec jackup rigs were commanding US$65k/day and mid-water floaters US$80k. This represents a 50-60% discount from the last peak in 2014 before the oil price crash.
And with 114 units of undelivered rigs across global yards, few newbuild jackup rigs will be ordered in the next 18 months.
In 2003, even without excess supply, it took the sector a total of 24 months to see a 40% compounding increase in day rates to spurred newbuild activity.
"Maintain Add. Our $2.52 TP is based on 2.2 times CY18F book value, its five-year average," says Lim.
Year to date, shares in Sembmarine are down 1.7% to $1.84.
